During the recently completed Eurogroup summit in Bucharest, France’ Finance Minister Bruno Le Maire said that the European banking sector was “too fragmented” and urged immediate consolidation. His views were echoed by François Villeroy de Galhau, who sits on the Board of Governors of the European Central Banks.
The main financial argument for consolidation is systemic resilience, a view at times echoed by the former French finance minister and Director of the International Monetary Fund, Christine Lagarde. Counterarguments are also plenty, including the loss of competition for European consumers, the reluctance of big lenders to assume risk in low and medium-sized businesses, and the emergence of lenders that are too big to fail.
Advocating for a new wave of cross border consolidation, the French government wants to see lenders offloading Non-Performing Loans in Greece, Italy, Portugal, as well as the harmonisation of insolvency legislation.
On a regulatory level, Banque du France wants to see the loosening of rules on capital buffers for subsidiaries, which would make cross-border consolidation a more attractive investment.
Villeroy de Galhau wants to provide pan-European lenders with incentives to acquire smaller or weaker rivals in other EU states. These emerging pan-European lenders could, in theory, be credibly supervised by the Single Supervisory Mechanism.
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